A white woman signs a car lease agreement held on a clipboard by a white man holding her new vehicle's key.

Leased Car Insurance Coverage

Updated January 2, 2020 . AmFam Team

When you lease a car, how do you know what insurance to purchase? Do you need full coverage? Click through to learn more about insurance requirements for a leased car.

If you’ve decided to lease a car rather than finance or buy one outright, you may be wondering what the insurance requirements are for your leased car. Leasing a car is different than financing one, but the type of auto insurance you need is similar. We’ll help you figure out what types of coverage you should have on your auto policy when you lease a car.

Is Car Insurance Included in a Lease?

Typically, car insurance is not included in a lease and you’ll need to purchase your own coverage for your vehicle before driving the car off the lot. Car insurance is mandatory for leased vehicles because the leasing company wants to protect their investment and make sure if something happens to the car, they can recoup their losses on it.

Lease Car Insurance Coverage

Full coverage car insurance is required for leased vehicles because of the leasing company’s desire to protect their investment. But what is full coverage car insurance? You can think of it like a suite of insurance policies that together help to protect you and your car from as many types of damage or loss as possible. These policies include collision, comprehensive and liability coverage. And each type of insurance included plays a key role in protecting your new vehicle — and your savings — if you’re in an accident. Types of coverages included in full coverage include:

Collision insurance

Collision coverage helps pay the cost of repairing or replacing your car after it’s damaged in an accident, whether it’s your fault or not. If you get T-boned, rear-ended or side-swiped, or you do the same to someone else’s vehicle, collision coverage helps protect you financially from the expense of repairs.

Comprehensive insurance

Comprehensive insurance helps pay for damage caused by accidents that don’t involve colliding with another vehicle or object. This includes vandalism, hail damage and collisions with animals, among other things. Comprehensive insurance, along with collision coverage, are typically also required on financed vehicles.


Liability coverage

Bodily injury and personal property liability coverage helps pay for costs associated with injuries to your passengers, the driver, passengers of the other vehicle and any personal property damaged in the accident if you are held at-fault. It also can help pay for bodily injury to pedestrians. If you are taken to court over an accident, bodily injury coverage can also help pay for legal fees. Your leasing company — and your state — may have a minimum requirement of bodily injury liability coverage, but it may not be enough to cover the actual costs of an accident. Check with your insurance agent to make sure you have enough of this important coverage.

Underinsured and uninsured motorist coverage

These are two different types of coverage that help pay for damages if you’re in an accident with a driver who either has very minimal car insurance or doesn’t have any at all. Underinsured motorist coverage can help if the other driver doesn’t have enough insurance to cover your costs after an accident, while uninsured motorist coverage can help if the other driver has no insurance whatsoever.

Do Leased Cars Need Gap Insurance?

Gap insurance coverage can help pay the difference between the amount you owe on the car and the total cost to replace it with a new one. Auto lease terms often run 60 months or longer. When you add to that the fact that your car depreciates — usually 11 percent the minute it leaves the lot — people can quickly find themselves owing more on leases or loans than the vehicle is worth.

Here's how gap insurance can help with your leased vehicle: if you’re in an accident and your car is a total loss, your auto policy will generally pay you for the actual cash value of your vehicle. However, the value of the vehicle might be less than what you actually owe, leaving you with a potentially hefty bill. Loan or lease assistance coverage helps pays the difference — or gap — to help cover the financial load.

Gap insurance may be included by the leasing company in the lease itself, so make sure you review the contract before contacting your insurance company to purchase gap insurance. You may also be able to purchase it through the dealership or leasing company, but it’s often far less expensive to do so through your auto insurance provider.

Planning on leasing a vehicle? Make sure you’re insured by connecting with your American Family Insurance agent (Opens in a new tab) to get all the coverage you need for your new vehicle. They can help you set up a full coverage car insurance policy to help you protect what matters most.

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